Fed: PM denies economy overheating as inflation takes off

AAP General News (Australia)
04-20-2000
Fed: PM denies economy overheating as inflation takes off

By Stephen Spencer, Economics Correspondent

CANBERRA, April 20 AAP - Prime Minister John Howard today denied Australia's economy
was overheating, as new figures show inflation is set to soar to a four-year high, adding
to the pressure for a further interest rate rise.

The price of building materials and manufacturing goods all rose sharply in the March
quarter, new figures revealed today.

They add to earlier figures showing manufacturing input and import prices rising strongly.

Economists are now tipping the annual inflation rate will rise to close to three per
cent late next week - the worst result since June 1996.

That's certain to increase the pressure for a further interest rate rise, possibly
as soon as next month.

Mr Howard refused to comment on the likelihood of a further rate rise, but insisted
there was no evidence the economy was overheating.

"I don't believe the Australian economy is overheating, no," he told Melbourne radio 3AW.

"The Australian economy is very strong but it's certainly not overheating."

However Colonial Group chief economist Craig James said there was now little doubt
prices were rising.

"The inflationary dragon is stirring ... manufacturers are starting to lift prices," he said.

"This increases the probability that another quarter of a per cent rate hike is forthcoming
in June."

Westpac noted that the main reasons for the higher prices were temporary factors like
the fall in the dollar and soaring world oil prices.

But while the dollar is bad news for prices at home, its a boon for exporters, with
the prices paid for Australian foods overseas rising 4.3 per cent in the March quarter.

It was the third consecutive rise in export prices which are now up 6.9 per cent for the year.

There's also good news on employment, with skilled job vacancies up a further 1.9 per
cent in April.

The Department of Employment, Workplace Relations and Small Business (DEWRSB) said
vacancies are now up 14.1 per cent for the year and 26.1 per cent in two years.

Vacancies rose in 14 of the 18 trades and professions.

A separate survey by the department also has found the jobs boom is not just confined
to the cities.

Employment Minister Peter Reith said the survey found employment in non-metropolitan
areas grew 3.0 per cent or 95,500 in the year to March - exceeding the 2.7 per cent growth
in jobs in metropolitan areas.

Seven regions had a jobless rate above 10 per cent in the March quarter, down from
20 regions a year earlier.

AAP ss/jtb/bwl

KEYWORD: ECONOMY NIGHTLEAD

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